Any FX traders here?
Discussion
Euribor and euroswiss, sometimes short sterling on a very unexpected figure. Pretty much always outrights, the exception being to trade a spread to transfer a poor position to a less poor one in another month. I'm a very simple person, none of this technical analysis nonsense or even very deep fundamental analysis; effectively I trade news (in a very broad sense of that word) and what I think the market sentiment is. That said, I only graduated in June so am hardly an expert!
Sorry I've taken so long to reply
I'll try and make it brief and to the point. I want to take advantage of the better interest rate (ir) offered in some countries ie Turkey.
I don't want to gamble/bet on currency movement (though I accept the consequances to my investment when this movement happens)
I see that some companies like oanda allow you to trade in 'couples' ie GBP/TRY. Will this allow me to do what I've outlined above?
To be clear, I want a method of putting £x into a foreign currency and earn that currencies ir on a daily basis. Now my maximum downside risk should be as outlined below:
I invest £1000 into a currency paying 10% ir. After 6 months in this position I have earnt £500. However that currency has now lost 10% of its value, so my profit is £0. I will have also obviously paid some kind of fee/commission/spread. THIS SHOULD BE MY MAXIMUM DOWNSIDE RISK. ie not the actual numbers I've given in the example but the principle.
What is the best product/company etc that allows me to carry this out?
I hope this makes sense, and many thanks in advance for any help
I'll try and make it brief and to the point. I want to take advantage of the better interest rate (ir) offered in some countries ie Turkey.
I don't want to gamble/bet on currency movement (though I accept the consequances to my investment when this movement happens)
I see that some companies like oanda allow you to trade in 'couples' ie GBP/TRY. Will this allow me to do what I've outlined above?
To be clear, I want a method of putting £x into a foreign currency and earn that currencies ir on a daily basis. Now my maximum downside risk should be as outlined below:
I invest £1000 into a currency paying 10% ir. After 6 months in this position I have earnt £500. However that currency has now lost 10% of its value, so my profit is £0. I will have also obviously paid some kind of fee/commission/spread. THIS SHOULD BE MY MAXIMUM DOWNSIDE RISK. ie not the actual numbers I've given in the example but the principle.
What is the best product/company etc that allows me to carry this out?
I hope this makes sense, and many thanks in advance for any help
You're not the first person to have thought of this you know ;-) - fx rates already take the current yield curve into account. If you have a long term view of interest rates that differs from the market then this can be done, but there's many other ways of exploiting this other than through fx.
Deep, are the ammounts and interest rates you quote real?...first off 10% interest rate appears as 50% return after 6 months??? We could elaborate on paying premium on fx options or locking expected returns with forwards, but to be honest with the ammounts involved it us hardly worth the effort on expected returns.
Retard said:
Euribor and euroswiss, sometimes short sterling on a very unexpected figure. Pretty much always outrights, the exception being to trade a spread to transfer a poor position to a less poor one in another month. I'm a very simple person, none of this technical analysis nonsense or even very deep fundamental analysis; effectively I trade news (in a very broad sense of that word) and what I think the market sentiment is. That said, I only graduated in June so am hardly an expert!
OK, thanks. I used to trade FRAs, then moved to short options, then long options, swaps and bonds, so have done a bit of everything in the rates world over the years. Not in rates so much anymore, though.Retard said:
Or to put it another way, you're asking for creation of risk free profit (arbitrage). This is effectively impossible for you in fx as banks get much tighter spreads than you, and banks also like risk free profit.
It is surprising (or not, I suppose) how often people try to get around the forwards like this.As Retard says, you simply cannot borrow in a cheaper rate country, or lend in a higher rate one, without also facing the currency risk. As soon as you hedge the currency risk, you lose all the advantage of the different rate.
It does occur to me that it may be possible in terms of the rates that Deep is actually eligible for in either currency. That said, with Alliance and Leicster advertising 12% on tv here it may be better going short in Lira (and would you want to open up a Turkish bank account when there's a non-zero probability of there being sanctions against Turkey in six months time?) In any case I think transaction costs are going to ruin this plan.
Incidentally, did you know that Oanada is primarily a behavioural economics data gathering experiment?
Incidentally, did you know that Oanada is primarily a behavioural economics data gathering experiment?
Ok either I haven't explained things clearly or I just don't understand the replies.
(Clubsport, sorry, that was meant to read £10000 invested)
I'm not after a risk free product by any means. I would have massive risk if for example the TRY dropped by 30% (which has happened before). My 10% pa return would be wiped out and I would suffer a 20% loss on my capital.
When they talk about 'couples' on oanda what does that mean then? On the website it gives the impression that (taking Turkey and UK as an example) if I 'buy' a GBP/TRY I borrow GBP at say 5% and get 15% return on my TRY and hence pocket 10%pa return (calculated daily) As long as the TRY doesn't devalue by more than 10% I'm making money.
This is what I would like to do. Its basically the 'carry trade' which has been going on for years, so why do you guys think it can't be done? Its hardly a new concept, I'm just after a method of getting exposure to it.
Any suggestions welcomed
(Clubsport, sorry, that was meant to read £10000 invested)
I'm not after a risk free product by any means. I would have massive risk if for example the TRY dropped by 30% (which has happened before). My 10% pa return would be wiped out and I would suffer a 20% loss on my capital.
When they talk about 'couples' on oanda what does that mean then? On the website it gives the impression that (taking Turkey and UK as an example) if I 'buy' a GBP/TRY I borrow GBP at say 5% and get 15% return on my TRY and hence pocket 10%pa return (calculated daily) As long as the TRY doesn't devalue by more than 10% I'm making money.
This is what I would like to do. Its basically the 'carry trade' which has been going on for years, so why do you guys think it can't be done? Its hardly a new concept, I'm just after a method of getting exposure to it.
Any suggestions welcomed
Retard, my risk will be in the foreign currency value itself. If I 'bought' £100000 (an example only!) of TRY and it fell in value (against the £ by 20% over one year (easily done in a non EU country with an immature economy and subject to extreme islamic factions) I've lost £20000.
Is that not a risk?
by 20% over one year (easily done in a non EU country with an immature economy and subject to extreme islamic factions) I've lost £20000.Is that not a risk?
There's going to be a very small bit of risk if oanda goes bust, yes, but not much I should have thought.
But the exchange rate already takes into account the interest rate difference, so you'll only profit by beating the market. Unfortunately for you as well, the pounds is a bit weaker today than it was yesterday due to what mervy king's been saying earlier.
But the exchange rate already takes into account the interest rate difference, so you'll only profit by beating the market. Unfortunately for you as well, the pounds is a bit weaker today than it was yesterday due to what mervy king's been saying earlier.
Deep said:
Retard, what do you mean that 'the exchange rate already takes into account the interest rate difference?
If interest rates are higher in country A than country B, then there'll be more demand for country A's currency for the reason given in this thread, so country A's currency will be more expensive relative to country B's currency than it would have been otherwise. You're essentially gambling that future exchange rates will remain the same. And if you want to do that, why not just trade some exchange rate futures?
Edited by Retard on Wednesday 14th November 16:02
Edited by Retard on Wednesday 14th November 16:05
Gassing Station | Business | Top of Page | What's New | My Stuff